One percent on cash sent abroad: the US remittance tax

The IRS puts it this way: from January 1, 2026, a one percent tax applies to transfers sent from the United States to recipients abroad when the sender gives the provider cash, a money order, a cashier's check or a similar physical instrument.

The sender owes the tax. Providers must collect it, make semimonthly deposits and file quarterly returns. A provider that fails to collect the tax owes it itself.

That is the key design point. The tax does not depend on the recipient, the destination country or the amount. It depends on the form in which you hand over the money.

And here is the all-clear for almost everyone reading this. Bank-to-bank transfers from a checking or savings account are not covered, because the sender hands over no physical instrument. Transfers funded by debit or credit card are not covered either.

So if you send rent from your US account back home, support your family, pay a bill in Europe, or take profits out of your US company and transfer them, you do not pay this tax.

What it hits is a very specific transaction: someone walks into a store with banknotes and has them sent abroad. That is what lawmakers had in mind, and it practically never happens among our clients.

Because it is a new category. The United States has always taxed income. It has always taxed consumption, at state level. What never existed before is a federal levy on money leaving the country as such, regardless of whether there is income behind it.

The money going out has already been taxed. It is charged a second time simply because it leaves the country.

Because exemptions can narrow. A rule that covers only cash today is easy to extend to other channels tomorrow. That is not a prophecy, just an observation about how taxes have historically evolved.

And because your payments are becoming more visible anyway. This tax generates reports, returns and data on cross-border payments. That alone is a change.

Nothing frantic. But three things are worth a look.

Check how money gets from your US company to you. If you own an LLC or a corporation, you take profits out through defined channels, and those channels have tax consequences far beyond one percent. Whether salary, dividend, distribution or loan is the right form decides your tax rate, not an excise tax. We cover this in Taking money out of your US company tax-efficiently and, depending on the entity, in Distributions from a US LLC and Distributions from a US corporation.

Keep your payment channels clean. Moving money through third parties, in cash or informally quickly gives you not just a tax problem in the United States but a regulatory one. The reporting thresholds for cash are low and the consequences unpleasant.

And remember the reporting duties in both directions. If you are a US taxpayer with accounts in Europe, you report them. If you are a European with accounts in America, automatic information exchange in the other direction applies only in part, because the United States has not joined the common reporting standard and runs its own system instead. What that means is explained in FATCA and CRS.

To put the tax in context, you need to know who it hits. Millions of people in the United States regularly send money to family in Central America, South Asia and Africa. A large share of that goes through providers who take cash, because the senders have no bank account or prefer not to use one.

That is exactly the group targeted. The tax is not a general levy on capital flows but a deliberate charge on one payment channel used by one particular part of the population.

You can call that fair or unfair, and in America people argue both. For context, it is enough to know this: lawmakers deliberately chose a criterion that depends not on the amount or the destination, but on the form of payment.

Practically nothing, as long as you work through accounts. Still, three related things deserve a look, because they cause trouble far more often than this tax.

Cash thresholds. Accepting or depositing cash above certain amounts in the United States triggers reporting duties. For customer-facing businesses that is routine; for European founders it comes as a surprise. Miss those reports and you do not have a tax problem, you have a criminal one.

Source of funds. US banks ask where your money comes from when you open an account and when larger sums arrive, and they mean it. If you transfer 300,000 euros from Europe, have proof of the source ready before they ask. What banks want to see is covered in Account opening and banking.

Documenting the flows. Every movement between you and your company needs a legal basis: capital contribution, loan, salary, dividend. Shift money back and forth without naming it, and the next audit brings a discussion you cannot win.

This tax comes from the same law that brings a whole series of changes this year that will affect European entrepreneurs more: new deductions for tips and overtime, a much higher cap on the deduction for state and local taxes, new savings accounts for children, and changed reporting thresholds for payment providers.

So do not judge the package by this one number. For most of our clients, this year's changes are not a net negative. They are just complicated, and complicated is the normal state of US tax law.

One simple principle helps: run your US finances so that every movement can be explained without you having to remember it. Everything else follows.

If you regularly move money between Europe and America, work out what it really costs you. Not the new tax, but your bank's exchange rate spread.

On larger amounts, a traditional high-street bank and a specialist provider are regularly one to two percent apart. That is several times what we are talking about here, and it applies to every single transfer, year after year, without ever showing up on an invoice.

So before you worry about one percent in tax, think about two percent in bank margin. Getting that order right saves more money than any tax planning.

So you do not get stuck on this one number, here are the points from the same legislation that matter more in practice for European entrepreneurs with a US company.

The cap on deducting state and local taxes. For years it was capped at $10,000 and it has now been raised significantly. This matters mainly in states with high income or property taxes, such as New York, California and New Jersey, less so in Texas or Florida.

New deductions for tips and overtime. For hospitality and trade businesses, this changes payroll and what employees expect. If you run such a business, talk to your payroll provider early.

Changed reporting thresholds for payment providers. If you sell through platforms, reports to the IRS now kick in at different thresholds than before. That affects every European seller with a US sales channel.

All three affect your tax bill more than the excise tax this article is about. They just never make the headlines, because they are technical.

In the United States, January decides how painful April will be. Three things should be done now.

First, sort last year's records. Not in March. Sort in January, and you have a tax return in February and peace in April.

Second, prepare the information returns for contractors and employees. They are due at the end of January, and the deadlines are strict.

Third, review your structure. The turn of the year is the only time certain tax elections can be made cleanly. If you realize in June that your entity type is wrong, you can no longer fix the year.

The details are in US tax basics and, for companies, in Tax services for US companies.

This tax is part of a legislative package passed in July 2025 that contains a whole series of changes we will be dealing with all year. Within that package it is one of the smallest items and at the same time one of the most symbolic.

Because it answers a question that comes up in almost every consultation about moving abroad sooner or later: can I get my money back out? The answer is still yes. It just isn't completely free anymore.

If you want to set up your withdrawal routes properly before they become habit, talk to Mount Bonnell Advisors in Austin, Texas. Our US taxes guide gives you the bigger picture.

Consultation & implementation

If you'd like to find out what this means for your own situation, the best step is to book a consultation.